Accountability Under Review: Why the stakes are so high for viable ways to protect rights and the environment under a global development agenda

In a norm-disrupting year marked by the aggressive rise of populist political agendas that have made multilateral relationships more vulnerable and less sustainable, international financial institutions are deciding on a seemingly collective strategy to weather uncertain times, and their mantra is efficiency. By streamlining operations and lightening the perceived load of due diligence requirements, they hope to unlock finance and entice private sector support as international relations become more transactional and the compounding crises of our time – climate disruption, biodiversity loss, rising debt and wealth inequality – persist.

In the name of efficiency, public accountability is also on the table. Major financial institutions have begun internal processes to review the systems they have established to protect rights and environmental integrity in the pursuit of development. As banks rush to streamline operations, those rights-based systems are at risk of being quietly weakened.

A quick briefer on accountability in development finance

Over the past 30 years, international financial institutions have been trying to figure out exactly how to do development while also respecting human rights and protecting our shared environment and the ecosystems we rely upon. Considering sticky political dynamics and the social complexity involved in the interplay of national interests in the pursuit of a liberal international order, the solutions devised to date have been environmental and social safeguards and performance standards negotiated to set baseline due diligence commitments. The vastly under-appreciated and still not very well known way for project-affected people to hold international financial institutions to their commitments are special offices called Independent Accountability Mechanisms (IAMs).

IAMs exist as quasi-judicial venues for people harmed or at risk of being harmed by international development projects to have concerns heard and issues resolved. They are “quasi-judicial” to the extent that, to varying degrees, they offer independent scrutiny over environmental and social compliance, can issue public-facing findings and recommendations, and facilitate mediation efforts; however, international financial institutions have limited their power and influence by requiring that IAM decisions be non-binding, and reserving for themselves the final decision on actions to be pursued in response to harm.

Nonetheless, the creation of IAMs has served to advance access to remedy, the fundamental right that underpins all other human rights, where it never existed before. So long as development exists, IAMs are systems worth protecting, improving, and indeed empowering.

Consider how IAMs have helped to address and highlight the problem of forced displacement, which coincidently was the predominant issue leading to the development of the first IAM. The World Bank Inspection Panel might never have come into existence but for public outrage about extensive physical and economic displacement caused by a large-scale hydroelectric dam project across the Naramada River in India. Over the years, IAMs have helped communities assert their rights to land and to demand justice for disrupted livelihoods and cultural loss. IAM cases collectively have also helped to unveil the pervasiveness of the problem, providing an evidentiary basis to advance social change. This year, a strong movement has grown against the present paradigm of forced displacement in development finance, as more than sixty rights-focused organizations across the globe are advancing a policy proposal to better support community participation in investment decisions that impact their land and lives. This is accountability in action.

A review of the reviews

To that end: No less than six consequential IAM reviews are underway, and each offer potential to improve the delivery of rights-compatible development under the vision of a just transition. The normative framework used to advance good IAM policy has long been the effectiveness criteria for non-judicial grievance mechanisms outlined by United Nations Guiding Principles for Business and Human Rights. Financial institutions should review their IAMs with the purpose of improving accessibility, transparency, predictability, and other principles intended to enable the prevention and remediation of harm. That should be the goal; however, while most institutions have committed in principle to non-regression of policy, the question remains whether measures of efficiency will compromise effectiveness and stunt the development of IAMs.

Consolidating as public and private finance amalgamates: The World Bank Group is actively considering whether and how to “integrate” the IAMs of its public and private sector arms (the “Accountability Mechanism” of the World Bank, and the “Compliance Advisor Ombudsman” of the International Finance Corporation and Multilateral Investment Guarantee Agency) as it pursues a “One World Bank” agenda focused on mobilizing private capital to support economic growth and job creation in developing countries. Part of this agenda includes the securitization of development projects, an initiative that will all but guarantee the prioritization of profit above all other development impacts, and make development finance harder to track for the purpose of accountability. There is some hope that a unified mechanism will be equipped to better enable remedy for harm via a “remedial action framework” that is presently applied to private-sector, but not public-sector, projects. However, pursuing a model that makes finance more obscure and distant from project impacts puts this all at risk.

Pursuing arms-length accountability: The Board of the Asian Infrastructure Investment Bank has unanimously voted to approve changes to the policy of the bank’s Project-affected People’s Mechanism, an IAM that oddly enough has not found a single complaint eligible since its creation in 2019. The new policy should be published in early January 2025, but the updates will likely not address fundamental issues impeding true accountability, such as so-called “good-faith” engagement requirements that would make complainants potentially put themselves at risk of retaliation by having to seek redress first from the project-level grievance mechanisms made available by the vested interests in the project, and then bank management who may also have their own personal career incentives that stand to be threatened by a complaint. Another reason for the PPM being ineffective precisely highlights the risk of the World Bank Group’s pursuit of development financialization – AIIB projects financed through capital markets or even co-financed with another bank are blanketly exempt from the PPM process.

Improving cooperative models: Three bilateral development institutions – DEG of Germany, FMO of the Netherlands, and Proparco of France – are now deciding how to update the policy of their shared IAM, the Independent Complaints Mechanism (ICM), based on inputs received through a recently-concluded public consultation. The European banks are poised to improve upon past practice in several ways, including by equipping the ICM with a remedy-focused mandate that will help to prevent, mitigate, and otherwise provide redress for adverse human rights and environmental risks and impacts. By seeking to make the ICM more independent and centralized, the banks will set a benchmark for an effectively designed shared IAM model, especially if the final policy addresses legitimacy concerns presented by various opportunities for bank management to influence the proposed investigation process.

Meanwhile, the Asian Development Bank, European Investment Bank, European Bank for Reconstruction and Development, the African Development Bank, and the German KfW Development Bank are all in various stages of their respective accountability reviews as well. Each is certainly watching for changes pursued by peer institutions that might influence the community of practice. The hope is that institutions compete upwards. The risk is they compete down.

How promises get compromised

Let’s not kid ourselves – these reviews are occurring at a time of shifting geo-politics, growing efforts to quash dissent in civic spaces, and challenges to predominant global development models. For example, we have seen the Trump administration follow a playbook to weaponize accountability as a means of dismantling global humanitarian programs. By convincing the American public that international aid and development finance is imperfect, which is true but largely not for the reasons they claim, the administration pushes forward an alternative vision in the name of advancing U.S. economic interests.

Ajay Banga, the President of the World Bank Group, has recognized this prerogative, issuing a public statement earlier this year that the World Bank’s mission to eradicate poverty was never intended to be an altruistic endeavor but, rather, a strategic plan “shaped by U.S. interests” to “forge a global economic landscape ripe for private sector investment.” We’ve seen the same rhetoric applied to steer the U.S. International Development Finance Corporation to become an instrument of expanding U.S. industrial power, and to dismantle the U.S. Agency for International Development.

Chinese banks, on the other hand, have yet to fully embrace accountability models. While China EXIM bank has a limited channel and a new accountability mechanism for the mining industry is up and running, most Chinese banks do not have trusted channels to hear community concerns about projects financed overseas. That should change.

Geo-political interests are what get in the way of a rights-based development model. They shift the purpose of development finance from collectively lifting humanity and empowering local innovation to strategically advancing national interests and economic dominance above all else.  

To the extent that governments have been subject to corporate capture, certain vested interests are also to blame. This year we’ve seen the private sector dedicate serious resources to lobby against human rights due diligence legislation to protect their economic interests, essentially arguing against equipping rightsholders with tools to hold them accountable for not proactively managing human rights and environmental impacts.

The struggle of maintaining a baseline on a weak foundation and shifting sands

We envision a world where people and planet are prioritized over profit; communities have a say in the decisions that impact them; and peoples’ rights and environments are respected and protected. And we are betting that most people would agree with that vision.

The task at hand is keeping clear sight of that vision while also holding the line on accountability. Accountability keeps power in check, so power is innately inclined to push against it. Every review presents an opportunity to either empower or disempower communities with agency to guide their own development, decide their future, and defend their rights.

In the upcoming year, advocates must continue to push for IAM empowerment. In practice, this means protecting their independence and monitoring policies that stand to impact the perceived and actual effectiveness of IAMs, and the integrity of their leadership. It means demanding that international financial institutions improve policies to deliver remedy alongside accountability, working to ensure that no adverse human rights impact is left unremediated. It means growing a people-powered movement that challenges the present development paradigm, and demanding not only that development banks focus on a just transition, but also a transition to justice.